Recap of May 3: Bye Bye Bear?

No more war – now stocks are following a better profit picture, and they are creeping higher. Did the bear market die along with Saddam’s regime?

Jonas Max Ferris of Maxfunds.com says he thinks the bear market did die during the war as far as investors were concerned, but he thinks it “actually” died much earlier than that. In fact, he thinks the bear market died in October of last year.

Charles Payne of Wall Street Strategies says the bear market has been dying since last year and has been on the run since the war, but he says he’s not convinced it’s still not a threat. He thinks corporate managers are doing the work they need to be doing to get investors back into the market, and he calls first quarter earnings “fantastic” in his view. He also says top-line growth is coming back solidly for many companies. But he says that even though a 20 percent move off the lows on the major indexes is the accepted definition of a bull market, he says he won’t be comfortable that the bear is not a threat until he sees those indexes move 40 percent higher this time around.

Jonathan Hoenig of Capitalistpig Asset Management says a lot of stocks are doing really well and so are corporate bonds, but he’s not buying U.S. stocks yet. He says even if the bear market in U.S. stocks is dead, that doesn’t mean the major indexes won’t go sideways for awhile. He’s still putting new money to work in Latin America.

Dagen McDowell of FOX Business says the bear didn’t die during the war. She says the bear market’s death will coincide with an economic recovery, and right now the signs are mixed.

Hilary Kramer of A&G Capital says we are seeing the backside of the bear, and it’s going into hibernation. She agrees with Charles that corporate earnings were good in the first quarter and that companies are once again demonstrating solid top line growth.

Be$t Bets: “Goodbye Bear” Buys

The bears are on the run – so which stocks make the best buys right now? The crew named their favorites.

Charles says it’s not a stock he would buy, but what he does like about Toyota is the management and the return on assets from investments the company is enjoying. He says in this regard, Toyota is outpacing the industry, and viewed from that perspective, it is probably an undervalued stock. Jonathan calls this a “weak stock in a weak group” and says if he were to buy in Japan he’d buy a bank or financial stock, not Toyota.

Jonathan says this stock doesn’t interest him; it’s not his type of name. He says DoubleClick (DCLK) is a little stronger in the group, but he’s not buying here. Hilary says you can’t beat Lamar’s 45 percent operating margin. She likes the pick.

Charles likes the chart on this closed end fund, but he has some concerns about the fact that it is a closed end fund, and he says it looks like the fund is invested in some economically sensitive areas that he would be wary about right now, so he does not recommend it. Hilary says it makes sense to have some fixed income in the portfolio, but you have to watch this fund carefully if interest rates start to move higher.

Mutual Fund Face-Off: Best Microcap Funds

Tiny stocks are up big this year. If the bear market is over, microcap stocks could be a great bet – but they are very risky. Funds can help to limit that risk. Which is the best microcap fund? Dagen and Jonas faced off over their favorites.

Dagen says you have to realize that no matter what the settlement amounts to, brokerage firms are in the business of selling securities, and more often than not, they are going to tell you to buy, rather than to sell. But she says the settlement may have shown investors to be more skeptical. Charles thinks we are looking a few bad apples, and he says there are still a lot of good analysts out there. But he says the change for the better needs to come from the top, and this settlement isn’t going to bring that. Jonathan thinks that because of the new regulations that will come from this that the quality of analysts’ work will actually suffer, and you can’t rely on it entirely.

Question: “I am thinking of putting some money into JetBlue (JBLU). What do you think?”

Charles says this company has a “cult following” among both customers and investors. It’s a great company, but the stock is highly valued and could hit a bump in the road. Still he says it’s worth a look. Dagen says, “Fly it – don’t buy it.” Jonathan doesn’t like the airline group in general.

Jonathan says the long-term starts with the short-term, and Ford just isn’t on his radar right now. He’d rather buy high quality debt than high quality, or big cap, equity right now. Dagen and Charles wouldn’t own this stock either – they both say it’s not worth the risk.

Dagen says that for a telecom equipment company Nortel has a decent balance sheet, but a “stupid” valuation (it’s too pricey). Charles likes Lucent (LU) for a telecom play, and Jonathan prefers Telecom Corp of New Zealand (NZT) in the telecom sector.